The New Seasonal Trade: Just Go Away In May

Last month was the most sluggish of the year for trading in stocks, options and equity futures as investors coasted along with a rising stock market.

With stocks grinding higher, investors have seen little reason to make changes to their portfolios in stocks marking new highs, said Randy Frederick, managing director of trading and derivatives at Charles Schwab. “If you have positions on, and the market is going up, you’re probably making money so there’s no reason to get out,” he said. “You’re not going to get high volumes when the [stock] market is powering higher.”

Adding to the stalemate: befuddlement over the unexpected decline in bond yields. That development has some stock investors wondering if the bond market knows something they don’t about the outlook for the economy. But at the same time, it’s not enough to convince investors to take money off the table, and lead to stepped up trading.

Average daily total composite stock-trading volume in May was 5.7 billion shares, the lowest average volume for any month since August 2013, according to WSJ Market Data Group. May’s average daily volume compares with 2014′s year-to-date average volume of 6.5 million shares traded per day.

Slow stock trading filtered into the options market, where traders often use puts and calls to hedge positions in the stock market.

Roughly 315,630,000 puts and calls changed hands on shares and indexes last month, making it the slowest May since 2009, according to the OCC, the options market’s clearinghouse. Just 15 million options changed hands on the average day in May, the slowest pace since August 2013.

Equity-index futures trading volumes also suffered. CME Group Inc. saw volume in equity index futures saw 2.2 million contracts swap hands, on average, each day in May, the lowest since July 2013, according to the exchange.

Overall, some 45.6 million equity-index futures changed hands on CME last month, the slowest May since at least 2009. That compares with 57.7 million in April 2014, and 61 million in May 2013.

CME Group held 85% of futures-trading market share in April, according to data compiled by KOR Trading LLC.

Even trading in volatility took a respite. Average daily volume in futures on the CBOE Volatility index was 143,946 contracts in May, down 1% from May 2013 and off 19% from April 2014, according to CBOE Holdings Inc.